The Cost of Borrowing Money

On this podcast episode I talk about the cost of borrowing money and specifically the fear of borrowing money (which I see many beginners have).

I use a live case study of a house that I am currently fixing and flipping in Cocoa Beach, which will be listed on the MLS in the next few weeks for $169,900. My purchase price was $55,000.

On this fix and flip case study, I borrowed ALL of the money. I borrowed the $55,000 to purchase the property and I also borrowed the $30,000 to repair the property. My out of pocket cost at closing was zero. And I received a check of $28,000 which I used to contribute towards the cost of the repairs. I only needed to lay out $2,000 from my pocket for closing costs and another $1,800 for taxes, insurance and utilities. The net cash that I laid out from my pocket was only $3,800 on this house.

The profit on this deal is $58,950 assuming I can net a sales price of $160,000. That profit of $58,950 is AFTER commissions, interest, insurance, repairs, utilities and closing costs.

That profit of $58,900 is on an investment of only $3,800 cash out of pocket. That represents a return on cash invested of 1,550% which is HUGE.

If you want to be a real estate investor, then you are going to need to get over your fear of borrowing money. You will also need to fix your credit and learn how to pay your bills (and interest) on time.

You need to learn how to borrow money from investors, and you need to learn how to leverage that money to make even more money. Remember that the KEY to growing your business is learning how to borrow money.